One of the biggest changes in the stockbroking industry currently is the license for Jio BlackRock Broking to act as a broker. Jio BlackRock enters a field where companies like Zerodha and Upstox are rivaling each other. When asked about the new license to Jio BlackRock, Zerodha's co-founder Nithin Kamath called it great news. However, he does not believe the real competition to Zerodha will be from incumbents.
Jio BlackRock Broking License:
Last week, Jio BlackRock was granted a certificate to act as a stockbroker / Clearing Member. Jio BlackRock is a joint venture between Reliance Industries-backed Jio Financial Services and BlackRock. The duo hold 50% stake each in the JV.
Zerodha Nithin Kamath On Jio BlackRock:
Through his X handler, Nithin pointed out, many people asked me about Jio-BlackRock getting a stockbroking license. He said, "Firstly, this is great news."
However, Kamath believes the biggest issue for the Indian markets is a lack of breadth in participation. Adding he said, "We're largely limited to the top 10 crore Indians."
"If anyone can expand the markets beyond the top 10 crore Indians, it's probably Jio with all its distribution might. As for how many new Indian investors have the money to invest in the market, I don't know," he said.
How do companies think about broking?
According to Kamath, they are not chasing vanity metrics. He said, "The idea is to stay profitable and, more importantly, ensure that we stick to the principles and philosophies that have gotten us this far. At the heart of our philosophy is to always do the right thing for customers."
"This means not pushing customers to trade and ensuring there are no unnecessary notifications, dark patterns, etc," he said.
Further, Kamath said, "We understand that in the long term, the odds of success are better if customers trade less; most of our product decisions are based on this," adding, "We're not interested in acquiring customers using one plan and changing the pricing later."
Hence, Zerodha is in no hurry. Kamath said, "We are in it for the long haul and are always working to ensure we have the best product offerings that help our customers grow with us. I don't know if you can say the same about many other financial services businesses in the industry, who are constantly looking to grow at any cost."
However, the Zerodha chief believes the real competition is likely to come from first-generation founders.
"And yeah, I still feel our real competition is going to be more from first-generation founders who are running, breathing, and always thinking about broking. I somehow don't feel it is really going to be from incumbents. This is not a business where having deep pockets means you have a large moat," he said.
Zerodha Broking Ltd is an Indian brokerage and financial services company, based in Bengaluru. It offers an electronic trading platform that facilitates institutional and retail trading of stocks, derivatives, currencies, commodities, mutual funds and bonds. It is a member of the National Stock Exchange of India (NSE), the Bombay Stock Exchange (BSE), and the Multi Commodity Exchange (MCX). As of May 2024, it has 7.5 million active customers registered with the NSE, making it the second largest stockbroker in India, as per Wikipedia.
It was Nithin who bootstrapped and founded Zerodha in 2010 to overcome the hurdles he faced during his decade long stint as a trader. At present, Zerodha has changed the landscape of the Indian broking industry.
Nithin is also a member of the SEBI Secondary Market Advisory Committee (SMAC) and the Market Data Advisory Committee (MDAC).
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